Hi all,
my question is aimed at the Black-Litterman experts. I am constructing a
portfolio consisting of various equity indices and express 1 absolute
view and 1 relative view on another 2 assets.
Additionally, I have to express confidence levels put into each view.
The higher the level the larger the deviation from its equilibrium
weight. Thats my question: Does the tilt from equilibrium necessarily
reach its maximum when my confidence is 100% ?? Or may it reach its
largest tilt at a lower confidence level? Does not sound intuitive, but
my calculations just show that (maximum tilt at 99% confidence to be
specific).
Thanks for your input.
Regards